Bank of America NA vs David Willows
Case No: 17CV05312
Hearing Date: Wed Mar 28, 2018 9:30

Nature of Proceedings: Demurrer

Tentative Ruling: The court overrules the demurrer of defendants Jackson Valley, LLC, and David Willows to the complaint of Bank of America, N.A., Successor by Merger to BAC Home Loans Servicing, LP, f/k/a Countrywide Home Loans Servicing LP. Defendants Jackson Valley, LLC, and David Willows shall file their answer to the complaint on or before April 2, 2018.

Complaint: On November 22, 2017, plaintiff Bank of America, N.A., Successor by Merger to BAC Home Loans Servicing, LP, f/k/a Countrywide Home Loans Servicing LP (“BOA”) filed its complaint for 1) cancellation of reconveyance; 2) declaratory relief; and 3) unjust enrichment. BOA alleges:

On July 25, 2007, defendant David Willows obtained a loan as evidenced by a Promissory Note (“BOA Note”) in the amount of $978,500. The note was secured by a deed of trust (“BOA DOT”) on real property at 6703 Del Playa Drive in Goleta. [Complaint ¶21] On March 9, 2009, Willows transferred the property to Jackson Valley, LLC. [¶23]

On November 13, 2009, a Substitution of Trustee and Full Reconveyance was recorded releasing the BOA DOT. At the time, the BOA DOT should not have been released because the BOA Note had not been paid. [¶24]

On January 12, 2012, Jackson Valley obtained a $550,000 loan secured by the property and a Deed of Trust was recorded on January 26, 2012 (“Allstar DOT”). [¶25]

A Rescission of Substitution of Trustee and Full Reconveyance was executed on March 20, 2012; it was recorded in the Official Records of the County of Santa Barbara on March 27, 2012. [¶27] On October 16, 2013, an assignment of the BOA DOT to BOA was recorded. [¶28]

On March 25, 2015 a Full Reconveyance of the BOA DOT was recorded. This Full Reconveyance should not have been recorded because the BOA Note has not been paid. [¶30] In order to legally cancel the full Reconveyance and avoid unjust enrichment, defendants’ written consent or a court order rescinding the erroneous Full Reconveyance is required. [¶31]

BOA asks that the court declare void the reconveyance recorded on March 25, 2015; that all defendants maintain title subject to the BOA DOT; that the BOA DOT holds a second position lien junior only to the Allstar DOT; and that defendants be enjoined from attempting to sell, transfer or encumber the property.

Proceedings: On January 29, 2018, BOA and all defendants other than Willows and Jackson Valley filed a stipulation for an order dismissing them from this action with prejudice. The court entered an order pursuant to the stipulation. The stipulation states that the Allstar DOT is a first priority lien against the property. The stipulation further states that, except that no order or judgment may affect the validity or priority of the Allstar DOT, the stipulating defendants agree to be bound by the judgment and orders of the court in this action, before or after trial, and that the court shall retain jurisdiction over the defendants. The stipulation also states that the stipulating defendants will be provided with all notices required by law if a judicial foreclosure is ordered in this action.

On March 7, the court denied defendants’ motion for a preliminary injunction, suggesting that the more appropriate path would be a motion to expunge BOA’s notice of pendency of action. On March 19, defendants filed their motion to expunge, which is set for hearing on April 11.

Demurrer: Defendants Willows and Jackson Valley demur to the complaint on the ground that the November 13, 2009 Full Reconveyance was not effectively rescinded by the unilateral rescission recorded on March 27, 2012, and any action to rescind that reconveyance is barred by the statute of limitation.

BOA opposes the demurrer on several grounds: 1) defendants failed to comply in good faith with meet and confer requirements; 2) notice of the demurrer was insufficient; 3) the demurrer relies on matters that go beyond the pleading; and 4) defendants do not have a credible theory that targets the validity of any of plaintiff’s claims.

1. Meet and Confer Efforts and Timing of Service: In its tentative ruling for the hearing on March 7, the court indicated it would strike the demurrer for failure to file the declaration regarding the pre-filing meet and confer requirement in CCP § 430.41(a). At the hearing, the court did not adopt that part of the tentative ruling, instead continuing the hearing on the demurrer to March 28 to allow defendants to comply with CCP § 430.41(a). On March 13, counsel for defendants filed a declaration detailing the efforts to meet and confer on February 8 and 9.

BOA argues that defendants did not meet and confer in good faith. The statute requires that the declaration must state that a “good faith attempt to meet and confer was made.” But the statute lacks any teeth. CCP § 430.41(a)(4) provides: “Any determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer.” Once the declaration is filed, the court cannot do anything about the meet and confer efforts.

The timing of service of the demurrer has been cured by the continuance. BOA has fully responded to the demurrer.

2. Request for Judicial Notice and Objections: Defendants ask the court to take judicial notice of Exhibits 1-14 and 16-22 (there is no Exhibit 15). BOA objects to judicial notice of Exhibits 2-8, 10, 12-14, 16, 17, 19, 20, and 21.

a. Procedural Noncompliance: The exhibits consist of 72 pages. Defendants have made the court’s task difficult by not complying with applicable rules of pleading. Papers filed with a trial court “must be numbered consecutively at the bottom unless a rule provides otherwise for a particular type of document.” CRC 2.109. This also applies to documents submitted in support of law and motion matters. CRC 3.1110(c). Defendants have not consecutively numbered the 72 pages of exhibits.

“[E]lectronic exhibits must include electronic bookmarks with links to the first page of each exhibit and with bookmark titles that identify the exhibit number or letter and briefly describe the exhibit.” CRC 3.1110(f)(4). Defendants have not provided electronic bookmarks to exhibits, so the court has had to scroll through the pages looking for the applicable exhibits.

b. BOA’s Objections:

(i) Exhibit 2 is an “Agenda Letter” from the Santa Barbara County Board of Supervisors. The court may take judicial notice of official acts of the legislative, executive, and judicial departments. Evid. Code § 452(c).

On its face the “Agenda Letter” sets forth only a “recommended action.” There is no evidence that it is an official act of a public entity. Even if it were, a public record of which the court could take judicial notice must still be properly authenticated. People v. Medina, 51 Cal.3d 870, 890 (1990). The document is not authenticated.

In their reply, defendants attempt to bootstrap the exhibits into the realm of judicial notice by stating the court may take judicial notice of its own file and the same documents were presented with the motion for a preliminary injunction. The same request for judicial notice was filed there and it suffers from the same deficiencies.

There is a declaration of David Willows in support of the motion for preliminary injunction. But defendants misunderstand judicial notice. “Evidence Code sections 452 and 453 permit the trial court to ‘take judicial notice of the existence of judicial opinions and court documents, along with the truth of the results reached – in the documents such as orders, statements of decision, and judgments – but [the court] cannot take judicial notice of the truth of hearsay statements in decisions or court files, including pleadings, affidavits, testimony, or statements of fact.’” People v. Woodell, 17 Cal.4th 448, 455 (1998). The court can only take judicial notice of the truth of facts asserted in documents such as orders, findings of fact and conclusions of law, and judgments. Day v. Sharp, 50 Cal.App.3d 904, 914 (1975). The court cannot take judicial notice of the truth of testimony presented. People v. Teresinski, 30 Cal.3d 822, 827 n1 (1982).

In ruling on the preliminary injunction, the court made no findings of fact that would support judicial notice of the facts and documents included in defendants’ request for judicial notice.

(ii) Exhibits 3-6, 10, 16, and 17 are “Official Record Index Searches” from the office of the Santa Barbara County Clerk, Recorder, and Assessor. Each exhibit contains the name of a document and the date of recording. The actual documents are not provided. On their face, these documents reflect that data provided on the website “is for information purposes only and should not be used as the authoritative record.” At most, the court could only take judicial notice that a document by the name referenced was recorded on the date referenced, not the content or effect of the documents. But defendants do not provide authentication sufficient for judicial notice of even that minimal information. Sustained.

(iii) Exhibits 7 and 8 purport to be unsigned messages from BOA. They are hearsay and unauthenticated. Sustained.

(iv) Exhibits 12, 13, 14, 20, and 21 purport to be unsigned messages from Ocwen Loan Servicing, LLC. They are hearsay and unauthenticated. Sustained.

(v) Exhibit 19 is a Form 1099-C from Ocwen. It is hearsay and unauthenticated. Sustained.

c. Judicial Notice: The court will take judicial notice of recorded documents. Herrera v. Deutsche Bank National Trust Co., 196 Cal.App.4th 1366, 1375 (2011). Judicial notice does not extend to the truth of factual matters stated in the documents. Poseidon Development, Inc. v. Woodland Lane Estates, LLC, 152 Cal.App.4th 1106, 1117 (2007).

“In addition, courts have taken judicial notice not only of the existence and recordation of recorded documents but also of a variety of matters that can be deduced from the documents.” Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256, 264-265 (2011). “[A] court may take judicial notice of the fact of a document’s recordation, the date the document was recorded and executed, the parties to the transaction reflected in a recorded document, and the document’s legally operative language, assuming there is no genuine dispute regarding the document’s authenticity. From this, the court may deduce and rely upon the legal effect of the recorded document, when that effect is clear from its face.” Id.

3. Substance of Demurrer: The court’s only task in ruling on a demurrer is to determine whether the complaint states a cause of action. Moore v. Regents of University of California, 51 Cal.3d 120, 125 (1990). The court assumes the truth of allegations in the complaint that have been properly pleaded and give it a reasonable interpretation by reading it as a whole and with all its parts in their context. Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal.4th 553, 558 (1998). The court assumes the truth of the reasonable inferences that may be drawn from the properly pleaded material facts. Reynolds v. Bement, 36 Cal.4th 1075, 1083 (2005). However, the assumption of truth does not apply to contentions, deductions, or conclusions of law and fact. People ex rel. Lungren v. Superior Court, 14 Cal.4th 294, 300–301 (1996).

“A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” SKF Farms v. Superior Court, 153 Cal.App.3d 902, 905 (1984). The court does not take any evidence. Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459, 478 n4 (1992).

(CRC 2.109 provides that the page numbering of papers filed in trial court “must begin with the first page and use only Arabic numerals (e.g., 1, 2, 3).” Both parties violate this rule: BOA by not counting the first page and by numbering tables with Roman numerals; defendants by starting their demurrer with three unnumbered pages followed by a page 1, an unnumbered page, another page 1, a third page 1, and then eleven unnumbered pages.)

Defendants’ sole argument is that the action is barred by the three-year or four-year statute of limitation applicable to cancellation of an instrument based on mistake, declaratory relief based on mistake, and unjust enrichment based on mistake. BOA does not quarrel with the applicable limitation periods.

Defendants contend that the operative reconveyance is the November 13, 2009 reconveyance, not the March 25, 2015 reconveyance. BOA filed the complaint eight years after the 2009 reconveyance.

BOA alleges that it rescinded the 2009 reconveyance by the Rescission of Substitution of Trustee and Full Reconveyance executed on March 20, 2012, and recorded on March 27, 2012. [Complaint ¶27] Defendants argue that the recorded rescission was ineffective to rescind the 2012 reconveyance, citing BOA’s conclusory allegation in ¶31 of the complaint: “In order to legally cancel the full Reconveyance and avoid unjust enrichment, Defendants’ written consent or a Court Order rescinding the erroneous Full Reconveyance is required.” Willows did not sign the rescission of the 2009 reconveyance. [Request for Judicial Notice Exhibit 11]

In the first cause of action, BOA seeks to cancel the 2015 reconveyance. On its face, that cause of action is not barred by the statute of limitation. It may be that a successful cancellation of that instrument will have no effect. But that is not what defendants argue. They only argue that the cause of action is time barred.

In the second cause of action, BOA asks the court to declare the 2015 reconveyance null and void and determine that the BOA DOT is a second position lien. Again, that cause of action is not barred by the statute of limitation. The 2009 reconveyance may be a reason that the BOA DOT is not valid and BOA may not prevail against summary adjudication or at trial. But that is not the issue here.

In the third cause of action, BOA alleges that defendants were unjustly enriched by the 2015 reconveyance. If the 2009 reconveyance is still in effect, the 2015 event may not be the one that enriched defendants, unjustly or otherwise. But, on its face, the cause of action based on the 2015 reconveyance is not barred by the statute of limitation.

For the foregoing reasons, the court overrules the demurrer of defendants Jackson Valley, LLC, and David Willows to the complaint of Bank of America, N.A., Successor by Merger to BAC Home Loans Servicing, LP, f/k/a Countrywide Home Loans Servicing LP. Defendants Jackson Valley, LLC, and David Willows shall file their answer to the complaint on or before April 2, 2018.